Businesses and other organizations must consistently manage the performance of their employees in order to maximize the employees' contribution to the organization to help the organization achieve its strategic goals. It is difficult to establish a system that consistently inspires and motivates employees. Motivating and inspiring employees is more challenging in client services industries because, although the employees are employed by an organization, they are performing tasks for clients or customers of the organization. This situation creates a disconnect between employees' motivation to improve their performance, and the clients or customers' achievement of strategic goals.
Compensation is sometimes used as a way of motivating employees. However, oftentimes the performance of employees is not adequately linked to their compensation, making compensation an ineffective motivator. As an example, if decisions about compensation involve too much subjectivity, then it will not serve as an effective tool for motivating employees.
There are various approaches that attempt to address performance management and compensation to employees in the marketplace. For example, common approaches involve performance reviews, merit increases, incentive plans, and recognition programs that attempt to solve the performance management and reward issues within organizations. Some of these approaches include running reports to determine “after-the-fact” performance at the end of a reporting period. All of these approaches force managers and supervisors to review data from many sources and to try to subjectively determine agent performance by their own mental analysis.